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WASHINGTON -- A growing number of Americans quitting the labor force are likely gone for good, offering a cautionary note to the Federal Reserve as it tries to gauge how tight the job market is and how quickly to raise interest rates.

For a long time, data suggested a significant portion of the decrease in labor force participation was because many job seekers had grown frustrated with their search and had given up looking. If the job market tightened enough, the thinking went, these Americans would be lured back to hunt for work again.

But a different picture is now emerging. Data shows participation in the past few years has fallen mainly because Americans have retired or signed up for disability benefits.

"The data suggest that the recent exits from the labor force have been more voluntary in nature than was the case in 2009,

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when the economy was weak and job prospects were dire," said Omair Sharif, senior economist at RBS in Stamford, Conn.

According to economists who have analyzed Labor Department data, 6.6 million people exited the workforce from 2010 and 2013. About 61 percent of these dropouts were retirees, more than double the previous three years' share.

People dropping out because of disability accounted for 28 percent, also up significantly from 2007-2010. Of those remaining, 7 percent were heading to school, while the other 4 percent left for other reasons.

In contrast, between 2007 and 2010, retirees made up a quarter of the six million people who left the labor force, while 18 percent were classified as disabled. About 57 percent were either in school or otherwise on the sidelines.

"This suggests the current drop in the labor force is more structural in nature," said Sharif.

If so, there is less hope of luring people back to hunt for work as the job market tightens, as many Fed officials believed would be the case. And the U.S. central bank, which has held benchmark rates near zero since December 2008, will likely need to push them up sooner than they would have otherwise.

"It is not clear whether the overall participation rate will increase anytime soon, given that the underlying downward trend due to retirements is likely to continue," said Shigeru Fujita, an economist at the Federal Reserve Bank of Philadelphia.

Less Labor Market Slack

Some Fed policymakers, such as San Francisco Fed President John Williams, are starting to acknowledge that structural factors are playing a big role in the labor force's decline.

In a speech last month, Williams said the slack in the labor market could be "much less than assumed," cautioning that inflation could rise more quickly than currently anticipated.

There are people who aren't in the labor force who say they want a job and who could potentially be drawn back in.

Last year that figure stood about 700,000 higher than it would in a normal market, according to the Labor Department's survey of households. But if employment increased by about 115,000 jobs a month, as the survey found it did last year, they could easily be absorbed in about six months.

The disappearing slack is underscored by a sharp decline in the ranks of the short-term unemployed.

These workers, whose skills are still sharp, are viewed as the most desirable by employers, economists say. Further, they appear to hunt for work more aggressively, according to a study released last week by former White House economist Alan Krueger.

In contrast, long-term unemployed can see their skills erode

and lose contact with people who could help them find a job. Because employers find them less desirable, their presence in the labor market may not do much to keep wages down.

The unemployment rate for people out of work for six months or less was at 4.2 percent in February, well below its 5.2 percent post-recession average. The number of short-term unemployed workers is now at about the same level as in 2004.

As for the long-term jobless, their ranks are still more than double their 2004 level.

Some economists say the dwindling pool of attractive workers may already be leading employers to bid wages up. Average hourly earnings for production and nonsupervisory workers notched their biggest gain in four years in February, even as some broader measures showed little acceleration.

"With the short-term unemployment rate already back to its pre-crisis level, any further declines will put upward pressure on wages and ultimately inflation," said Torsten Slok, chief international economist at Deutsche Bank Securities in New York.

"For the Fed, the problem is we are still having a fed funds rate which is zero. I think the Fed will start to change its tone, most likely in the second half of this year."

Interest rates are low, but that's no excuse to accept 0.01 percent interest rates on your savings. Just a little shopping can find you many FDIC-insured savings accounts paying as much as 1 percent in interest, usually with no fees and easy availability to your money through electronic funds transfers. Compared to the near-zero rates that uninsured money-market mutual funds and other alternatives pay, high-interest savings accounts are a much safer way to save.

Banks still try to get customers to pay more for less, with one recent threat to charge fees for basic deposit accounts if the Federal Reserve cuts interest rates further. But many online banks not only offer fee-free options on their checking and savings accounts but also pay interest, and many have extensive fee-free ATM networks or reimbursement arrangements. If your bank follows through on threats to raise fees, taking your business elsewhere is your best move.

Bankrate reports that the average credit card charges around 16 percent in interest. That's a guaranteed money-maker for the banks that issue cards, but a big loser for those who carry balances on their cards. With many cards offering promotional interest rates as low as 0 percent, using them to get rid of high-interest cards is a no-brainer move and can help you pay your debt down faster.

Mistakes on your credit history can keep you from getting a loan that you want to buy your next home or car, but they can also have consequences you'd never imagine. Increasingly, insurance companies, apartment rental agents, and even prospective employers order copies of your credit report to see if you're financially responsible. Be sure to take advantage of your free credit check at the government's annualcreditreport.com website to make sure the three big credit-rating agencies have everything right before mistakes come back to bite you.

Payday loans have gotten more tightly regulated recently, but banks and other financial institutions still offer ways to let you get quicker access at your cash -- for a hefty fee. Resorting to short-term money fixes can land you in even more problematic situations down the road, because those solutions often create debt spirals from which it's hard to emerge unscathed. Set up an emergency fund instead and be prepared in advance for the money woes that life throws your way.

Interest rates have risen during the last half of 2013, with a typical 30-year mortgage carrying a 4.5 percent interest rate. But many homeowners still carry higher-interest mortgages from before the financial crisis. Now that home prices have risen, you might be able to refinance for the first time, and many homeowners have used lower rates to cut hundreds from their mortgage payment or shift to a shorter-term 15-year mortgage to pay off their debt faster.

Too many people never update their insurance coverage to deal with changes in their coverage needs, whether it comes from changes in family status for life insurance, health conditions for health-care or long-term care insurance, or even what types of property you own for homeowners' insurance. Don't wait for disaster to strike; check with your insurer or agent to see if your current coverage meets your needs.

In the past, investors had to pay hundreds or even thousands of dollars just to make a simple stock purchase. Now, though, the rise of discount brokers, low-fee index funds and exchange-traded funds, and freely available investment news and advice have made it silly to spend large amounts to get access to the financial markets. If you're still paying your broker too much to invest, look into alternatives that can help you avoid cutting serious money out of your retirement nest egg.

Everyone likes a tax break, and one of the best ones for you to use involves making contributions to a tax-favored retirement account. By putting money in an IRA or 401(k), you can reduce your current taxable income and save on your taxes while also preparing for the future. With 401(k)s, your employer might even chip in a bit on your behalf. Even when times are tough, finding even small amounts to save can put time on your side and make a big difference down the road.

Many investors found out the hard way this year that bonds aren't as safe as they thought, with some major bond funds posting double-digit percentage losses in 2013. Despite those losses, bonds still carry substantial risk in 2014, with many calling for imminent interest-rate hikes that would erode their value further. Even now, bond rates are so low that they don't compensate you much for their risk.

In contrast to bonds, stocks have soared in 2013. That has some investors finally piling into the market for the first time since 2008 and 2009, while others remain shell-shocked from the massive losses they incurred back then during the financial crisis. Even with the Dow Jones Industrials (^DJI) and other major market benchmarks near all-time record highs, it makes sense to have some stock exposure in your portfolio. Just don't go overboard in the false belief that gains of 20 percent and 30 percent will happen every year.

If you pay full price for just about anything these days, you're paying too much. The rise of deep-discount stores has led to falling prices at stores and shopping malls. Moreover, online tools like coupon sites, daily-deal offers, discounted gift cards, and cash-back credit-card deals can cut your costs as well. With all these tools, you won't find many situations in which you have no chance of getting a bargain on the items you want.

In the past, many young adults focused on getting into as strong a college as they could, figuring that their degree would pay them enough to make up for the costs they incurred. With college graduates facing a more challenging job environment than ever, smart students are thinking about college costs before they make a decision on a school. By maximizing financial aid and looking at lower-tuition schools with nearly as strong educational quality, you can avoid creating a big debt hole that you'll struggle with for years into the future.

If you don't have a will, a power of attorney for financial and health-care matters, and an advance directive to tell medical professionals whether you want certain life-preserving measures taken if something happens to you, then you're putting your family at risk. Many people don't have even these basic estate-planning documents, but getting them in place is easier and less expensive than most believe. Get your affairs taken care of in 2014 and save your loved ones some big future hassles.

Resolving to be more financially astute and to avoid common mistakes will help you get your finances in order more quickly. These tips should give you more money to help you meet all your financial goals.

Introduction to Retirement Funds

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drpmindmender

Many of the jobless are dropping off the rolls because they are are victims of age discrimination, they have reached 62 or 65, and are opting to start collecting their SS benefits, they have been unemployed for longer than 6 months, and are often shunned by propective employers as if they were lepers, or thei they haven't got the educational foundation and/or the relevant job skills for the many jobs that ARE available.

There is an excess of people that need a job thanks to the large underground undocumented population, expired visa holders and valid visa holders. The BLS disclaimer on their employment reports about not asking legal status does a disservice to American citizens in need of employment. As long as there is an invisible labor force that only the employers can pick an choose from millions of US citizens will remain unemployed or listed as not in the labor force.

Instead of having people on the phone making random calls, how about sending youir people out, pounding the pavement, get down to where we are and ask us to our face about the job market?! You might get a different picture.

I know the theory that most workers dropped out of the labor market due to retirement is false. In my state Age discrimination is alive and well. Dishonest employers take advantage of the State's LWD web site. Some employers will call you at home to find out your age. The fact that your in the State's unemployment/ labor computer system is proof your of legal age to work but those employers looking to abuse the system by discriminating against older people will still do so.

I get real tired of you republicans saying this administration is passing out benefits for the non working Americans. This administration has nothing to do with such junk remarks. The republicans control the house and they have to pass legislation before the president can sign it into law. Not to forget the red states are cutting back all kinds of benefits for the working class Americans.

I.m of hearing this nor do I believe it. We are Americans not the Greeks, the French or the Italians, we don't quit or give up we owe more than that to both the generations that came before us and those that follow us, it seems I have more respect for the men of this country than 90% of the clowns sitting in Washington.So everyone knows I am 68 years old have been unemployed since May of 2012, I search every day, work at what is available and will continue to do so until I no longer can not because I don't want to but for what ever reason I am unable. For those who want to wallow in self pity or quit try a little intospection and study a little of what prior generations went through before whinning about your difficulties.For me though there is no surrender to become a ward of the state.

Well this Administration has been right free with handing out benifits, and encouraging people to not work, as it is hard for these academia types to work with the real world, and so instead of trying to enable people to work they instead enslave them with handouts, Unemployment of 99 weeks, disability, and dropping the work for welfare requirements. And those who want to work are usually crowded out by younger cheaper employees. Experience does not matter anymore, a colleg degree is all it takes, have seen fine engineers and crafts people pushed out in favor of book learned youngsters who have no idea what is needed to excell in real world. First off get government out of the way, and let business grow, instead of back dorring more and more regulations that stifle business. Stop the food stamp and welfare push, and the free cell phone programs that this Administration has made great strides in increasing, while spending our hard earned money.

Most are like me, laid off in 2008 at age 58 and could not find another job. Did home repairs until people stopped spending in 2010 then started drawing from personal accounts until I was 62 and retired early.